Shawn Flynn’s Silicon Valley podcast, an award-winning podcast that features famous entrepreneurs, VCs, and leaders in tech, invited Aaron McDaniel and Klaus Wehage on their episode entitled, ”Expanding Into New Markets.”

Here are the key takeaways:

The Business Model Localization Canvas

[Min 11:46] One of the frameworks we have developed is called the “Business Model Localization Canvas.” It’s a great tool to align and spark a conversation amongst the team by identifying the right questions to identify the business model changes needed when scaling into new markets. In simple terms, we say you have to run your validated model in your initial market through 2 filters:

1. Government and regulation

2. Culture

With this framing, it helps the team to develop market expansion hypotheses. When researching for Global Class we realized that this process is often very abstract for global teams and difficult to manage and align on.

Why Customer Validation Is Important

[Min 12:42] Take Cinnamon.AI as an example. They were focused on talking to customers and validating their solution in the U.S. market, instead of what other founders tend to focus on: investments (which is bad!).

It’s really about talking to customers and understanding how you need to adapt your business model to successfully scale (or not if you discover it is not the right market). Then, it’s proving and validating the business that then leads to traction, which is ultimately what investors care about. 

It’s very rare that you see founders come from another country to then raise capital immediately before any proven traction and validation in the U.S. Just because you built something successful at home you can’t expect investors will have enough conviction to then make an investment.

In our programs, we focus on that validation piece. Validation is key to raising capital because if you just focus on investment from the start, you're going to waste a lot of time and money focused on the wrong things.

Localization Discovery: How Evernote Identified Market Opportunities in India

[Min 13:37] Another concept that we talk about in the book is called “Localization Discovery.” It’s a process where you talk to not just customers but other stakeholders in the ecosystem as well. Many companies over-index on desk research, but relying on research from afar (HQ) will make many wrong assumptions. But it’s really important to have conversations with all different types of stakeholders in the market to see if that's really true on the ground. 

A great example of this is a story that was shared by Troy Malone, who’s been the Head of International for a number of fast-growing companies, including Evernote.

When Evernote was expanding into India, they were targeting the upwardly mobile and young Indian population for their premium Evernote products. For Evernote, their existing payment processing was credit cards. When they conducted research from HQ, they discovered that credit card penetration was really high within that group. 

So Troy went into the market to do localization discovery and talked to all sorts of people, including taxi drivers, waiters, and hotel staff. He said everybody had an “Auntie Story,” where a family member who got a credit card racked up a bunch of debt and it ruined their life.

So, everyone who has a credit card is just too scared to use it. If Evernote had gone to market with the same credit card processing as done in the U.S., it would not have been successful. Instead, they used another popular local payment processing system called Paytm which was a successful decision.

The Key To Avoiding The “Us-Versus-Them” Mentality Between HQ And Local Offices

[Min 21:26]  Global Class companies that have been successful in reaching global scale have this notion that HQ is not command and control telling everyone what to do, but is more of an enabler and supporter of different localizations that are required to be successful in multiple markets.

A driver of that is two-way innovation. It's not just HQ saying, “We're going to do things this way” but creating mechanisms to say, “That's an interesting idea” or even the local team saying, “Hey this works here. I have a mechanism, a path to be able to share that through HQ to then have it spread amongst multiple places.”

All these insights don’t just come from Klaus’ and Aaron’s experiences. It stems from in-depth research and interviews with more than 400 international business leaders across 50 countries from more than 250 of the world’s fastest-growing companies, which include Google, Canva, Slack, Shopify, and Shipbob, among many others. 

They have developed a unique set of insights (supported by case studies) that can help organizations of all sizes, industries and growth stages build successful global businesses.

About Global Class

The Global Class team has developed THE playbook that teaches organizations the right mindset, culture, and strategies to successfully build global businesses. Through consulting engagements and practical tools (+ case studies built from conversations with over 400 executives from the world’s fastest-growing companies), we help executives with companies valued at $1B to $100B reach global scale. From market entry to global scale, we help companies build the foundation for successful global growth through management consulting services, customized platforms, and more.